Moody’s cuts U.S. Steel, notes; rates notes B1

Moody's Investors Service said it downgraded United States Steel Corp.’s corporate family rating to B3 and its probability of default rating to B3-PD from B1 and B1-PD respectively.

At the same time the agency downgraded the senior unsecured notes rating to Caa1 from B2 and the industrial revenue bond ratings, guaranteed by U.S. Steel, to Caa1 from B2. The speculative grade liquidity rating remains unchanged at SGL-2.

This concludes the review for downgrade initiated on March 31.

In addition, Moody's assigned a B1 rating to U.S. Steel's proposed debt offering of senior secured notes due 2021 and a provisional Caa1 to the company's senior unsecured shelf.

Proceeds from the proposed secured note offering will be used to repay near-term debt and for general corporate purposes.

The outlook is negative.

Moody’s said the downgrade reflects the significant deterioration in U.S. Steel's performance and debt protection metrics and expectations that continued weak performance will be evidenced given the challenging conditions facing the U.S. steel industry, particularly for flat-rolled and tubular products.

For the year ended Dec. 31, 2015 U.S. Steel's adjusted EBITDA declined about 95% to $105.5 million from 2014 levels. For the 12 months ended Dec. 31, 2015 coverage and leverage as evidenced by its EBIT/interest coverage ratio and debt/EBITDA ratio was negative 1.7 times and 44.6 times.

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